Verizon rolls out Net-based phone service
Verizon Communications Inc., the biggest US provider of conventional phone service, yesterday launched its first Internet-based phone service that lets people with high-speed connections make unlimited local and long-distance calls for $40 a month.
On a day that AT&T Corp. said it would stop actively competing in the consumer long-distance market, the new Verizon offering shows how technology is rapidly reshaping the competitive landscape in the telephone industry.
Internet phone service relies on voice over Internet protocol technology, known as VOIP, that slashes the cost of phone calls, compared to conventional Bell System service, by converting them into the same data format as e-mail and Web pages and reassembling them to create continuous sound. While Internet phone service has been available since the mid-1990s as a crude computer-to-computer communications medium, within the last six to 12 months big-name phone companies have come to agree the technology has improved enough to begin marketing it under their own brands.
Verizon will sell its VoiceWing plan to customers who buy its digital subscriber line broadband service for $35 a month, with $5 off for each of the first six months. That compares to $55 for its unlimited local and long-distance plan over conventional phone lines. Verizon only roughly matches AT&T's CallVantage Internet phone service on price and features, and AT&T offers deeper discounts for the first six months.
Verizon has not yet agreed to sell DSL as a stand-alone product without local phone service bundled, so someone choosing the VoiceWing product would still have to pay for at least a bare-bones Verizon conventional phone line. Martin Kon of Mercer Management Consulting, a specialist in the Internet phone service market, noted that "if you still have to pay $15 or $20 for your conventional line, it's probably a little less attractive."
Compared to Verizon's plan, consumers interested in converting to an Internet phone service could save $100 a year or more by choosing among the many small and more obscure providers like Vonage Holdings Corp., the largest independent provider with nearly 200,000 subscribers, or smaller start-ups like Broadvoice, GalaxyVoice or WorldWide Telco.
"The Verizon offer does stack up pretty well, but there's nothing really overwhelming here," said Will Stofega, an analyst with International Data Corp.
Bob Ingalls, president of Verizon's retail markets group, said in a conference call with reporters yesterday that "VoiceWing is only the beginning of more VOIP services to come from Verizon." Next year, the New York-based telecommunications giant plans to begin marketing a reduced-price Internet phone service to small- and medium-sized businesses.
Ingalls also stopped short of guaranteeing Bell System-level service for VoiceWing, which does not support calls to 911 and which stops working if subscribers have a power outage at their home. "There is no VOIP system out there that's going to offer the same quality and reliability of the traditional network," Ingalls said, but added, "We're very confident that the product we're offering will be a quality product."
AT&T, which began deploying CallVantage this spring, is charging $35 for people who have to buy DSL or cable from another company, but taking $15 off for the first six months. AT&T offers the service only in the 100 largest US markets, while Verizon is selling it across the entire country, with local numbers available for subscribers to get incoming calls in 139 markets in 33 states.
AT&T CallVantage spokesman Gary A. Morgenstern said his company believes its customers will find call quality noticeably better than on Verizon VoiceWing, because "we are using a superior, private Internet network to deliver traffic."
Morgenstern added: "We're offering better price points than anything Verizon is offering, with better features." AT&T enables 10-way conference calls, while Verizon offers only three-way calling, as well as a "Locate Me" service that can ring up to five other numbers when a caller dials the subscriber's CallVantage number.
One perk Verizon does offer that AT&T now lacks is a way for subscribers to get a second phone number that rings their VoiceWing line, so that, for example, a subscriber in Boston could get a second number somewhere else in the country that a family member or friend living there could call to reach them and pay only local calling charges. Morgenstern said, however, that AT&T expects to match that feature within five weeks.
Verizon's Internet phone service move "shows their commitment to embracing new technology and being a technology leader" said Mercer's Martin Kon. Verizon has already poured tens of billions of dollars into extending its slowly ebbing landline phone franchise into a controlling position in the biggest US wireless carrier, and is also gearing up for a multibillion dollar push to offer high-speed fiber optics to millions of US homes and businesses.
"Verizon has a good brand in mobile and landline and Internet services, and there are huge advantages for people who can mobilize their existing customers bases to expand into these fast-growing new areas," Kon said. "With AT&T and Verizon in the market, it's going to be difficult to persuade anyone but the most price-conscious consumer to go to these lesser-known brands."
Peter J. Howe can be reached at howe@globe.com.
